Correct Questions on Guarantee Exam

All of the following are ways to handle risk EXCEPT a. transfer b. elimination c. avoidance d. reduction

B

What is a sudden, unplanned and unexpected event, not under the control of the insured, resulting in injury or damage that is neither expected nor intended called? a. peril b. hazard c. accident d. burglary

C

When the ownership of a vessel changes, the premium will be returned on a a. annual basis b. lump sum basis c. pro rata basis d. monthly basis

C

Which of the following authorities determines whether a Cease & Desist Order should be issues? a. federal insurance regulation board b. guaranty association c. commissioner d. naic

C

The businessowners liability coverage form would respond to a claim arising from which of the following events? a. an injury to an employee while performing his or her job b. damages sought by a third party as a result of an accounting error c. an injury arising out of the sale of alcoholic beverages d. an injury arising out of a customer falling because of a wet floor

D

A lender who conditions approval of a loan on the condition that the borrower purchase insurance from that lender may be guilty of a. unfair discrimination b. illegal inducement c. coercion d. misrepresentation

C

An applicant may challenge information discovered as a result of an investigative consumer report under which of the following Acts? a. consumer credit protection act b. HIPAA c. fair credit reporting act d. privacy protection act

C

When an insurer acquires the insured's rights against a third party for the purposes of receiving indemnification for loss, this is called a. transfer of liability b. liberalization c. subrogation d. indemnity

C

What is the maximum civil penalty per violation of the regulations of the insurance code that define acts that are subject to fines, or license suspension or revocation? a. $500 b. $1,000 c. $5,000 d. $10,000

C

When an insurer pays for the cost to exchange damaged property with new property of similar kind and quality, it is called a. market value b. stated amount c. replacement cost d. actual cash value

C

An executive is accused of sexual harassment. What type of coverage would respond? a. hiring practices liability b. commercial general liability (CGL) c. employment practices liability d. workers compensaiton

C

How many excess continuing education credit hours may a license carry forward from one licensing period to the next? a. none b. 6 c. 12 d. 24

D

In businessowners policies, a deductible does NOT apply to which of the following additional coverages? a. debris removal b. preservation of property c. forgery or alterations d. fire department service charge

D

Premiums collected on behalf of the insurance company by an agent will be held in what capacity? a. debit b. security c. rebate d. fiduciary

D

What are the two types of utility services endorsements? a. direct loss and indirect loss b. protective safeguards and mechanical breakdown c. open peril and named peril d. direct damage and time element

D

An insured has decided to never drive another vehicle and wants to transfer his auto insurance policy to his wife. What does the insured need to transfer the policy? a. the written consent of the insurer b. an auto policy cannot be transferred c. nothing, because the wife is automatically included as an insured d. the written consent of all other insureds covered by the policy

A

Which commercial property form is used to insure buildings while under construction? a. builders risk b. legal liability c. building and personal property d. business income

A

All of the following are true regarding a producer's fiduciary responsibilities EXCEPT a. a producer who fails to pay trust funds to the company represented is guilty of theft b. producers may commingle personal auto funds with company funds c. a producer who receives money for the sale or negotiation of an insurance contract must keep the funds in a separate trust account d. all monies must be accounted for and paid to the proper party

B

The transfer of a legal right or interest in an insurance policy is called a. liability b. assignment c. recession d. subrogation

B

Insurers CANNOT transact insurance in this state without a a. letter of clearance b. certificate of authority c. broker's license d. certificate of insurance

B

When an insured's gardener was spraying weeds in his lawn, he failed to notice that the wind was drifting the spray into the neighbor's yard where he damaged their flower bed. The insured was found to be legally liable for this damage. This is an example of a. gross negligence b. vicarious liability c. intervening cause d. comparative negligence

B

Which of the following actions does NOT constitute false advertising? a. using names that disguise the true nature of a policy b. stating that dividends are not guaranteed c. misrepresenting the terms of a policy d. representing an insurance policy as a share of stock

B

Which of the following exposures is NOT covered under a homeowners policy? a. personal liability b. medical payments to an insured c. unscheduled personal property for damage d. bodily injury to others

B

Due to appreciation, the amount of insurance on a business is less than 80% of its actual value on the date of the loss. Which of the following is true? a. the full amount of the loss less an deductible is paid b. the policyholder is responsible for twice the amount of the deductible c. the coinsurance penalty applies d. the policy pays nothing

C

What coverage form in the farm policy insures equipment on an open peril basis? a. farm property b. farm liability c. mobile agriculture machinery and equipment d. livestock

C

To be valid, an insurance policy must have all of the following EXCEPT a. acceptance b. consideration c. offer d. countersignature

D

Which of the following would be eligible for Homeowners Coverage F - Medical Payments in the event of injury at the insured's premises? a. the named insured's spouse b. a guest who was hurt at the insured's party five years ago c. a person regularly residing with the insured d. a full-time maid

D

All of the following are factors in the determination of actual cash value EXCEPT a. property type b. insurance premium paid c. age of property d. replacement cost

B

All of the following are true regarding the federal Fair Credit Reporting Act EXPECT a. reports may be sent to anyone who requests one b. insurers are not required to give customers a copy of the report c. it applies to credit reports ordered in connection with insurance, banking and employment d. the customer must be notified if adverse action is taken as a result of a report

A

Late one night on his way home from a local bar, a man runs his covered auto into an insured's car. The man was operating a vehicle while under the influence. The insured has no personal injuries, but her car had damages. Her insurance policy paid for the damages to her car. The subrogation provision in her policy allows a. the insurer to attempt to recover the damages from the man and/or his insurance b. the insured to sue the man to recover only the damages not paid by her own insurance c. the insurer to increase her premium because of being a higher risk d. the insured to sue the man to recover any damages she sees fit

A

The commissioner of insurance is appointed by which authority? a. governor b. insurance department's board of electors c. the naic d. guaranty association

A

The livestock coverage form provides coverage for livestock. Livestock means any of the following EXCEPT a. turkeys and chickens b. cattle and swine c. sheep and goats d. horses and mules

A

What is the difference between intrastate and interstate truckers? a. intrastate operate with the boundaries of a single state; interstate travel across state lines b. interstate are allowed to travel interstate highways and rural highways; intrastate are restricted to rural highways c. intrastate travel across state lines; interstate travel within boundaries of a single state d. interstate are subject to state regulation; intrastate are subject to federal and state regulation

A

Which of the following commercial auto coverages provides protection for most commercial auto exposures except truckers, garages, and motor carriers? a. business auto coverage b. business auto physical damage coverage c. named nonowner coverage d. commercial carrier coverage

A

Which of the following duties is NOT required of the insured in the event of a loss? a. immediately notify the insurer when the insured has filed be bankruptcy b. authorize the insurer to obtain records and assist the insurer in its investigation c. notify the insurer as soon as possible of the possibility of a claim d. immediately record the specifics of any claim and notify the insurer

A

Which of the following would be an allowable reason for an insurer to cancel an auto insurance policy? a. named insured's driver's license is revoked b. insured enters active duty with the military c. insured's age d. insured declaring bankruptcy

A

With respect to the commercial package policy, an interline endorsement is one that a. may apply to more than one line of insurance that is included in the package b. never applies to all of the lines of insurance that is included in the package c. applies to all of the lines of insurance that are included in the package d. applies to only one line of insurance that is included in the packages

A

According to the Fair Credit Reporting Act, all of the following statements are true EXCEPT a. investigative consumer reports can be used to obtain information on the applicant's character and reputation b. if an applicant is declined for an insurance policy, he or she has no right to know what was in the report c. it protects consumers against the circulation of inaccurate information d. it ensures that consumer reporting agencies are fair in their treatment of consumers

B

All of the following first party benefits that must be available for purchase with a motor vehicle insurance EXCEPT a. income loss benefit b. uninsured motorist benefit c. medical benefit d. funeral benefit

B

What is the minimum age to apply for a resident producer's license in this state? a. 17 b. 18 c. 21 d. 25

B

What is the purpose of the FAIR Plan? a. to encourage uniformity of benefits and provisions b. to provide basic property insurance to those who are otherwise unable to obtain it c. to make sure that premium rates are reasonable d. to provide benefits for insureds whose insurers have become insolvent

B

What two policy components are part of every commercial package policy? a. property coverage and liability coverage b. common policy declarations and common policy conditions c. common policy exclusions and agreement d. consideration and agreement

B

Two individuals of the same age, health status, and life expectancy apply for individual insurance coverage. When policies are issued by the same insurer, the premium rates are different based on the insured's race. What practice does this describe? a. negligent underwriting b. misrepresentation c. unfair discrimination d. defamation

C

An insured owns an automobile liability policy, with BI limits of $200,000 and an umbrella policy with a limit of $1,000,000. The insured is involved in an auto accident and is found liable for injuries totaling $900,000. Which of the following examples best describes how the benefits will be paid? a. auto = $200,000; umbrella = $200,000 b. auto = $450,000; umbrella = $450,000 c. auto = $0; umbrella $900,000 d. auto = $200,000' umbrella = $700,000

D

Other-than-collision would cover financial losses due to a. damage to an insured's neighbor's mailbox that was caused by the insured's pickup b. damage to an insured's car in an accident for which the insured was found at fault c. legal action brought against an insured for an accident d. damage to an insured's car caused by wind or hail

D

When would uninsured motorist coverage apply under a personal auto policy? a. an insured is injured in an auto accident with another motorist who is at fault but has limits of insurance that are not adequate to cover all medical expenses b. a family member of the insured is at fault for an auto accident with another motorist whose auto coverage limits are not adequate to pay for all damages c. an insured is at fault for an auto accident with another motorist, but the insured's limits are not adequate to pay for damages d. an insured is involved in an auto accident with another motorist who is at fault and does not have any insurance

D

Which of the following terms best describe the home of an insured who goes on vacation for 3 months? a. condemned b. temporary empty c. vacant d. unoccupied

D

Which of the following terms means termination of an insurance policy at its expiration date by not offering a policy continuation or replacement? a. suspension b. cessation c. cancellation d. nonrenewal

D

Which of the following would NOT be covered by uninsured motorist coverage? a. the insured's neighbor borrowed the insured's car and was hit by an uninsured motorist b. the insured's car is hit by someone whose auto insurer is insolvent c. the insured's family member is struck by a hit-an-run driver d. the insured causes a head-on-collision with the car of an uninsured motorist

D

The declarations section in a homeowners provides all of the following information EXCEPT a. amount of deductible applied to a loss b. insured locations c. policy exclusions d. basic underwriting information

C

Upon payment for a loss, the insured is obligated to surrender to the insurer the right to sue a negligent third party. This is called A. insurable interest b. entirety C. subrogation D. indemnity

C

What does the term reciprocity mean? a. allowing producers transact insurance after their suspended license is reinstated b. allowing producers share commissions on related business c. waiving licensing requirements for nonresident applicants who are licensed in their home state, if the home state awards licenses to producers in this state on the same basis d. waiving continuing education requirements for one type of license if the requirements have been met for a different type of license

C

Which of the following is FALSE concerning liability coverage of a business auto policy? a. the company will pay the premium on any appeal bond b. the company will pay any interest accruing between the time of judgement and payment c. the company will defend any suit alleging bodily injury or property damage covered by the policy d. the company will reimburse the insured for a loss of earnings

D

Which of the following statements regarding surety bonds is true? a. a surety bond is also known as third-party guarantee insurance because it always involves three parties b. the principal is the designated beneficiary of the holder of the surety bond c. the person who promises to fulfill the obligation of the bond is known as the obligee d. the purpose of the surety bond is to guarantee that specific duties or obligations will be fulfilled

D

Which of the following situations would be covered by workers compensation? a. a secretary chokes on an apple while on break in the break room b. a construction worker refused to wear a hardhat gets hit on the head at a construction site c. a professional chef burns himself on his stove at home while preparing for a private dinner party d. a printer gets her hand crushed in a printing press at work

D

When agents, brokers, or solicitors handle premiums for an insurer, they are acting in which capacity? a. natural person b. as a fiduciary c. as a managing general agent (MGA) d. legal representative with power of attorney

B

A person hold a temporary producer's license because he is the designee of a producer who has been called to active military duty. What is the maximum amount of time that the license will last? a. 360 days b. a period deemed to be necessary by the Commissioner c. 150 days d. 180 days

D

Coverage for which of the following perils must be contained in all Standard Fire Policies? a. hostile fire b. lightning c. removal from premises d. all of the above

D

Which of the following components is NOT part of a policy structure? a. definitions b. benefits c. declarations d. additional coverage

B

In a businessowners policy, which of the following would be covered? a. mobile equipment b. medical expenses c. liquor liability d. pollution

B

The owner of a rental dwelling, insured under a DP-2 turns off the heat in the insured dwelling during the winter months because the dwelling is not occupied. The building's water pipes freeze and break, causing damage. How will the policy react to this loss? a. the dp policy will pay for the pipes, but not the labor b. the dp policy will pay for the labor but not the pipes c. the loss is excluded from coverage d. the loss is covered

C

All of the following persons would be covered under a business auto policy EXCEPT a. an employee of the named insured operating an auto that is owned by the employee's spouse b. a person operating an auto borrowed by the named insured, with permission c. a person operating a covered auto with the permission of the insured d. the owner from whom a trailer is borrowed and contracted to an auto owned by the named insured

A

In a liability policy with split limits of 25/50/25, which number is the maximum amount that would be payable in the event of damage to a person's property? a. the amount of the third number; $25,000 b. the amount of all three numbers; $100,000 c. the amount of the first number; $25,000 d. the amount of the second number; $50,000

A

Costs to repair, recover, or recondition will exceed the policy limits, so the insurer pays the policy's agreed value. This is called a. demurrage b. a constructive total loss c. a general average d. a particular average

B

Coverage for loss by some perils under a building and personal property form is suspended if a. an uninsured peril causes a partial loss b. the insured building is vacant for over 60 days c. a loss occurs while a hazard beyond the insured's control is increased d. the insured fails to satisfy the coinsurance provision

B

An insured was injured while visiting a farm 5 years ago. He discovers today that he has medical problems caused by that injury. Will the insured's new medical expenses be covered by Coverage J - Medical Payments on the farm's policy? a. no, all expenses must be incurred and reported to the insurer within 4 years of the accident date b. yes, all expenses must be incurred and reported to the insurer within the policy period c. no, all expenses must be incurred and reported to the insurer within 3 years of the accident date d. yes, all expenses must be incurred and reported to the insurer within 6 years of the accident date

C

Which of the following best depicts the law of large numbers? a. larger groups produce healthier applicants b. large groups offer less opportunity for loss c. the larger the group is, the more likely it will be to get a good choice d. the larger the pool of risks under study, the more accurate the predictions will be

D

A insurance company that is owned by the policyholders is called a a. mutual insurer b. fraternal insurer c. stock insurer d. reciprocal insurer

A

Lost Treasures has a guard dog in a fenced lot to protect the salvage yard. The dog scared a passerby, who now claims that it was a traumatic experience and that he now suffers from recurring nightmares. A claim for personal injury of $5,000 is filed against Lost Treasures. Why will the personal and advertising injury liability section (Coverage B) of the CGL policy cover this claim? a. The injury was expected or intended. b. The occurrence was off premises c. Mental anguish is a covered injury. d. Animals are excluded from coverage.

C

Which of the following perils will be EXCLUDED from coverage under HO-4 Tenant Broad Form of a homeowners policy? a. fire or lightning b. volcanic eruption c. sewer water backup d. weight of snow, ice, or sleet

C

A licensee who has moved to PA from out of state must provide which of the following before becoming licensed as a resident in this state? a. proof of licensing or a letter of clearance from the previous home state b. a notarized copy of a PA driver's license c. a current utilities bill d. a united states postal service change-of-address form

A

Which of the following best describes a rebate? a. a producer returning part of her commission to her client, as an inducement to buy b. a producer misrepresenting policy provisions or coverages at issue c. a producer requiring an insured to buy insurance from her as a condition to a loan d. a producer selling insurance primarily to himself, his family, and his friends

A

An insured has a maximum limit of coverage available under her liability policy during a policy year, regardless of the number of claims made or the number of accidents. Her limits are restored at the policy anniversary. What type of limit does this insured have? a. single b. per occurrence c. aggregate d. split

C

In order to receive transportation expenses under the personal policy following damage to your auto caused by collision, you must have a. uninsured motorist property damage b. supplementary payments c. other-than-collision coverage d. collision coverage

D

If an insurance policy has the additional coverage provision, how does it affect the policy premium? a. there is no additional premium b. premium will be recalculated when a specific loss covered by this provision occurs c. additional premium will be assessed d. premium will be calculated on a pro rata based on the amount of additional coverage

A

Under Coverage C, and at the request of an insured, personal property of a guest or residence employee is covered a. while it is in any residence premises occupied by an insured b. while it is any residence premises occupied by a named insured c. anywhere in the world d. only while on a residence premises

A

A general liability policy will respond to claims against an insured when bodily injury or property damage is caused by a. a third party's negligence b. an insured's negligence c. acts of god d. chance

B

If an insured purchases an insurance policy with a large deductible, what risk management technique is the insured exercising? a. sharing b. retention c. transfer only d. avoidance

B

Once an insurer receives a claim, within how many days must the insurer provide claim forms to the insured? a. 3 calendar days b. 10 working days c. 15 working days d. 30 calendar days

B

Refusing the pay claims without conducting a reasonable investigation based upon all available information is an example of a. a required practice b. an unfair practice c. a fair trade practice d. a typical insurance practice

B

An agent tells an insured that if he replaces his current insurance policy with a newer one, his dividends will be higher and his premiums will be slightly lower. The policy, however, would not offer either one of these things. What type of misrepresentation is being committed? a. distorting b. replacement c. twisting d. rebating

C

Answers to questions in an insurance application are called representations and, as such, they are a. not true b. warranties c. believed to be true to the best of the applicant's knowledge d. absolutely true

C

Which of the following is NOT true regarding the automatic increase in insurance endorsement in dwelling policies? a. it increases the amount of coverage by an annual percentage b. it is optional c. it provides protection from inflation d. it does not require additional premium

D

Which of the following types of property would be covered under Coverage C - Personal Property in a dwelling policy? a. 1-2 passenger aircraft b. any personal watercraft c. motor vehicles d. rowboats

D